House prices will continue to rise faster than incomes for years to come, leaving households with an ever-increasing debt burden, the financial watchdog has warned.

Buying a home will result in a rising debt burden for British families unless there is a strong and ‘historically unprecedented’ increase in housing supply, the Office for Budget Responsibility forecast.

The watchdog put together a new model to forecast future house price growth relative to income.

Staying put: Home ownership could remain out of reach for many as house prices are predicted to outstrip wage growth for some time

It concluded that house prices and household debt are likely to ‘rise faster than income for some time yet’, but warned that models cannot account for short-term dynamics in the market where house price inflation is changing so rapidly.

House prices could rise at 5.3 per cent a year on average, it predicted, assuming real income growth of 2.2 per cent a year, a one per cent a year rise in the number of households, housing supply keeping pace with the number of households and inflation averaging at the Bank of England’s two per cent target.

The forecast comes as a new survey predicted that prices will continue to rise across the UK for some time, except in the capital where the soar away property market shows signs of running out of steam.

Tougher mortgage lending rules and the threat of rising interest rates are slowing the market, according to the latest report from the Royal Institution of Chartered Surveyors.

It said there is ‘more buyer caution’ and noted particularly an ‘increased air of caution’ in London, with fewer people showing an interest in buying a home.

It comes as the latest Halifax monthly house price index published yesterday, showed house prices have fallen in three of the last four months, dropping in March, April and June.

Halifax said if there had not been a sharp jump in May of four per cent, the average house price - currently £183,462 - would currently be lower than it was last winter.

However, its index only uses the bank's own mortgage approvals and thus potentially reflects a tightening of how much it is allowing borrowers to take on in the wake of the tougher affordability standards introduced by the Mortgage Market Review in late April.

The OBR predictions were made as part of a far reaching overview of the state of the country’s finances.

Pricey: with property prices soaring while wages rise by less than 2 per cent, the house price to earnings ratio has leapt and stands well above long-term average levels and near to the 2007 peak.

It warned a fresh wave of tax hikes or spending cuts will be needed to meet the growing cost of Britain's ageing population.

The next generation of workers also face having to stay in employment until they reach 70 to help keep the country's finances on the right track, it said.

And if the population ages more quickly than currently forecast – due to people living longer than expected – the state pension age could hit 75 in 2064.

Price growth: Values have soared in last 12 months - but slowed slightly on a monthly basis in June, according to Halifax

The OBR said that by then there could be more than 1million people aged over 100 in the UK.

Raising the state pension age to 70 is not current government policy – but sources close to Chancellor George Osborne last night refused to rule out such a move. And former pensions tsar Lord Adair Turner said it would be ‘a good thing to aim for’.

The OBR said raising the state pension age to 70 in 2063 would save £14.4billion a year in today’s money by reducing payouts and increasing the tax take through people working for longer.

But it added that even after such an increase further tax rises or spending cuts of nearly £30billion would be needed before the 2020 general election to put the national debt back on a sustainable path.

OBR chairman Robert Chote said: ‘If life expectancy increases as the Office for National Statistics expects, we project this would bring forward the increase in the state pension age to 68 that is already in the pipeline, as well as require further increases to 70 by 2063.’

Lord Turner said: ‘It is vitally important that we increase the state pension age in line with increasing longevity otherwise the mathematics do not work.

‘Something like 70 by 2040 combined with further increases in the generosity of the state pension would be a good thing to aim for.’